WASHINGTON -- Who are the major producers of oil in the world? The unsettling answer is Saudi Arabia and Russia. They produce about 9 million barrels of oil a day. And who are the world's major producers of natural gas? Again the answer is unsettling, Iran and Russia. There are students of geopolitics with a special knowledge of energy resources who worry about this. One, the economist Philip K. Verleger, Jr., believes that with regard to Russia and its energy reserves, we are in the second round of the Cold War.
As spring evanesces into summer and Americans take to the road in their gas-guzzlers, leaving their homes with air conditioners on high, it is perhaps an auspicious time to consider our energy needs. The presidential candidates, hustling for their parties' presidential nominations, tell us that they are going to make us "energy independent." At the same time they also tell us that $3-a-gallon gasoline at the pump is highway robbery. Some announce that they are going to investigate the oil companies. This is political schizophrenia. We cannot approach energy independence and maintain cheap oil prices simultaneously. In fact, in the near future neither goal is possible. America, with 5 percent of the world's population, uses 25 percent of the world's oil. And right now the world is consuming about as many barrels of oil a day as it is producing, which is 85 million barrels. In terms of oil production, the world is now at what is called "peak production."
The price of oil on the world market today is in the neighborhood of $70 a barrel, and Americans are complaining about paying more than $3 a gallon for gasoline. But by the end of the summer the world will be consuming over 85 million barrels of oil. The economies of the world's leading oil consumers, China and the United States, are that strong. Thus, oil experts such as Boone Pickens predict $80-a-barrel oil by the end of the year. He doubts that the world can produce more than 85 million barrels a day. That means the price of gasoline will be even higher than $3 a gallon. Verleger predicts $100-a-barrel oil before the end of 2008. Imagine what you will be paying for a gallon of gas then.